HSBC analyst acknowledges bank conspiracy to suppress gold price

Section:

'MIDAS' COMMENTARY FOR SEPTEMBER 18, 2001
COPYRIGHT 2001, WWW.LEMETROPOLECAFE.COM

By Bill Murphy
www.LeMetropoleCafe.com
September 18, 2001

Gold $286.50 down 95 cents
Silver $4.43 up 6 cents

The drama behind the scenes in the gold market has
never been more intense. The reckless behavior of the
Gold Cartel to continue to suppress the price of gold,
after the world completely changed a week ago, is not
only insidious and criminal -- it is going to go down
as one of the most foolish and irresponsible financial
maneuvers of all time.

This is how I see what is going on here.

For the second day in a row, the goons have sold down
gold on the Comex after strong fixes in London.
Yesterday's PM fix was $293.25. Today it was $289.40.
The daily trading charts in New York are practically
identical. Right after the PM fixes, the likes of J.P.
Morgan Chase and Goldman Sachs slam gold and the longs
on Comex.

There is a reason for that.

Serious physical buyers who want to buy gold in size do
so at the London fixes. That is because that is where
the big sellers are too, and large gold buyers can
conduct business without running the price up too much.
The Gold Cartel waits until that business is finished,
so as not to take on the buyers, and then tries to
break down the gold price at the vulnerable Comex.

It could not be more obvious what the desperado cabal
is doing. But I don't think it is going to work this
time.

* Demand for physical gold right now is soaring all
over the world and physical gold is hard to buy. Coin
dealer after coin dealer tells me the same thing. Even
if the coin dealers can get gold for you, the price is
way above that quoted on Comex. A friend of mine paid
$301 for Kruggerands today, which is down from $306
yesterday. The comment is always the same if you want
to buy: Forget the Comex price; the real gold world
price is higher than on Comex.

* The terrorist attacks on U.S. soil have changed
everything in terms of the notion of what a safe haven
is. That is not going to change anytime soon. Investors
all over the world are turning to gold again. The
problem for the central banks and bullion banks is that
they have about 14,000 tonnes of it lent out and can't
get it back without driving the price many hundreds of
dollars per ounce higher. They are in sheer panic that
another Washington Agreement kind of surprise is upon
them. But this one is 10 times worse. Herve Fervani,
one of the senior executives at the Banque de France,
has repeatedly warned other bankers about lending gold
out for such little interest income, because he said in
the end they might not get their gold back. Defaults of
that nature could be right around the corner.

Cafe members know all about that drill so I shall not
go there again. Too many new goodies to go over.

Take a gander at excerpts from this Bloomberg
story:

* * *

U.S. Terrorist Attack Prompts Many
Asians to Buy Gold Jewelry

By Rajat Bhattacharya

Bangkok, Sept. 18 (Bloomberg) -- Consumers in Thailand,
India and some other Asian countries reacted to the
terrorist attacks in the United States by heading for
the jewelry store to buy gold, retailers said.

Buyers in Thailand, where gold demand dropped by half
in the last five years, led a return to the precious
metal as a haven for investment after terrorists
destroyed New York's World Trade Center a week ago,
sending stock prices tumbling. Asia purchases more than
half of the world's gold each year and Thailand is the
second-biggest gold buyer in Southeast Asia after
Indonesia.

"We saw people storming into our stores to buy gold,"
said Jitti Tangsithpakdi, president of goldsmiths Chin
Hua Heng and president of the Thai Gold Traders'
Association. Last Wednesday, traders sold as much gold
jewelry as they did in an average month this year, he
said

In India, the largest gold buyer, sales also
increased.

"My sales have gone up 25 to 30 percent," said Pratip
Zaveri, director at Tribhovandas Bhimji Zaveri, India's
biggest jewelry retailer. The rising prices lured some
people to buy gold as a investment, he said. "They've
seen prices moving up again after a long time."

India makes more than one-fifth of all gold jewelry and
exports more than $8 billion worth each year.

"With interest rates so low, and stock markets down,
gold remains the best investment," said Jitti. "Other
investments are simply not that interesting."

Thailand's benchmark stock index has lost two-thirds of
its value in the past five years.

In China, the second-biggest gold user in Asia,
consumer demand may also be boosted by deregulation of
the market. The price of gold, which was freed from
government control in July, has risen 6 percent in the
past week, to 90 yuan a gram.

"Gold is great because it appreciates in value and is a
good store for value," said Meng Fanqiang, 32, who
bought a 1,700 yuan ($205) bracelet for his wife from
Ming Pai Jewelry Shop on Shanghai's Nanjing Road.

Other consumers in the region bought gold coins and
ingots.

"Our retail over-the-counter demand for coins and bars
was huge all day," said Alison Puchy, public affairs
manager for the Western Australia government's Gold
Corp., which owns the Perth Mint. "It went on and on."

Inquiries from overseas investors seeking
"depositary" certificates to buy gold held in its
vaults also increased, she said.

* * *

Pakistani Gold Prices Soar to
All-Time High Following US Attacks

KARACHI, Sept. 18 (Asia Pulse) -- The local bullion
market continued to face an uncertain global market
situation after Tuesday's attacks in United States, as
gold prices surged to all time high of Rs6,125 (US$95)
per 10 grams on Saturday.

The price of 10 tola gold (600 grams) is now quoted at
Rs72,500 from Friday's rate of Rs71,400.

* * *

We know that demand for physical gold is already
soaring around the world. What is going to happen to
gold demand when US retaliation against the terrorists
kicks in? Safe-haven buyers around the world will turn
to gold even more -- sidestepping the dollar then and
for years to come. That is what is going to happen. It
will be in-your-face time for the Gold Cartel.

Meanwhile back at the ranch, various gold shorts have
all sorts of problems that have surfaced
simultaneously, as a result of the terrorist attacks.

* Half the deliverable gold that was available to be
delivered to Comex longs belongs to Scotia Mocatta and
is buried beneath the World Trade Center rubble.
Something is not right about that gold. Either it is
not there (as per the Fox TV statement), or the shorts
know they are in big trouble come the October delivery
period because they can't get to the gold to deliver
it, if necessary. I say that because a reporter called
me today and told me that Scotia will not answer any
questions regarding the matter. "Why not?" he asked me.

* Some of the big overseas physical gold buyers have
contracted to buy gold here in the United States from
various suppliers to satisfy the demand mentioned
above. They need the gold, as it is committed to their
clients. But these buyers are used to doing the actual
buying on price dips. Thus, word to me is that they are
short and very exposed to a price run-up. Sources tell
me this same crowd was short, like they are now, before
the Washington Agreement was announced. Part of the
run-up in September 1999 was due to their frantic
buying of physical gold. Do we have deja vu all over
again?

* With little fanfare the Australian gold price has
gone thru the roof. It finished the day in New York at
A$588. That is because while the world gold price has
soared, the Aussie dollar has tanked to 49.34, only a
point off of multi-year lows. About a year ago, I was
going on and on that many of the Aussie gold producer
hedge books were going underwater. It was widely
reported that many bullion dealers were feeling the
financial stress and that was with an Aussie gold price
of only around A$520.

The bullion dealers are already in a panic about what
could happen in the financial arena in the weeks to
come. The credit departments of these banks have all
kinds of issues to suddenly address that are of mega
importance. Some of them, like J.P. Morgan Chase, could
have serious financial trouble themselves as expressed
in Midas commentary last nite. How will they handle the
over-exposed Aussie gold producer? Will they let their
margin situations get into the billions? Will these
producers be forced to cover?

Put this one back on the radar screen again, big
time.

Speaking of J.P. Morgan Chase, Lee Lafferty and Mike
Bolser report:

"Don't know if you've checked recently but the Office
of the Comptroller of the Currency data for Q2 2001 is
posted. JPMChase 2001 Q2 is up to $19.292 trillion, up
8.82%. Overall interest rate derivative positions for
all banks is up 8.56 percent to $30.092 trillion. Total
number of banks reporting continues to decline,
dropping to 367."

Good, J.P. Morgan Chase. Nice timing. Have you gone
mad?

More on the volatility problem of J.P. Morgan Chase
presented in yesterday's Midas. Many market analysts
expressed surprise at the lack of volatility in today's
financial markets. Not us.

All stock market indices were due sharply lower. They
all opened slightly higher in a complete surprise and
remained quiet. No big rally ensued. Just quiet,
although the stock market sank late when a new internet
virus began plaguing brokerages -- the concern being
that it is terrorist-related. The currencies: no real
action at all. Gold was held in check in New York as
always in times like this.

Bottom line: just what the U.S. government ordered:
very little volatility and another day that J.P Morgan
escaped the guillotine.

One fly in the appointment: the bond market.

December bonds closed at 103.22 down 1.22.

The bond vigilantes realize that the U.S. government
"guns and butter" policies, along with billions of
dollars of paper flooding the markets, is very
inflationary. Bond yields soared back up to 5.5
percent. This could be a financial market horror show
for J.P. Morgan Chase. Rising long-term interest rates
could be their death knell, from all the GATA camp can
figure -- a derivative undoing of the firm due to
Titanic-like, Wrong-Way Harrigan gold and interest rate
positions.

We shall see.

A couple of notes to close on:

* Silver is quietly moving up with little fanfare. When
the silver games end, and that might be beginning to
happen now, silver could double in price in a
blink.

* The Comex has big manpower problems. The marginal
traders and clerks just do not want to work there. Many
of them come in from New Jersey by water taxi, as no
cars are allowed -- then they have to go by the bomb
scene to get to the Financial Center. There are no
services at the moment, like restaurants, and the hours
have been reduced from 9:40 to 12:40. There was a bomb
scare today and everyone had to clear out for awhile.
Many employees never even bothered to show up for work
in New York. More will not show up tomorrow.

Will this exchange even exist in the weeks to come?

* The stock market PE ratio was anywhere from 24 to 34
before last Tuesday's attack. The historic norm is 14.
Not a bear market low, just the norm. That would
suggest, as the Cafe contributors have been saying for
a long time now, that the stock market is going to go
much lower.

Earnings are going to plummet for the foreseeable
future for most all industries as a result of last
Tuesday. Based on that certainty, it is more than MOST
likely that stock market share prices have a LOT of
downside in them. Nasdaq 500 brought to your attention
18 months ago looks more possible by the day.

* Fed Chairman Alan Greenspan has a closed session with
congressional leaders tomorrow. Hmmm. Look who is in on
deal:

"WASHINGTON (Reuters) -- Federal Reserve Chairman Alan
Greenspan plans to hold a closed-door meeting with U.S.
congressional leaders on Wednesday in the wake of last
week's devastating hijack attacks, aides said. The
meeting comes as Congress weighs new measures aimed at
bolstering the U.S. economy and aiding the airline
industry, and two days after the central bank cut
interest rates by a half percentage point. In addition
to Greenspan, White House economic adviser Lawrence
Lindsey and former Treasury Secretary Robert Rubin were
expected to take part in the 3 p.m. meeting with
Republican and Democratic leaders in the House of
Representatives and the Senate, aides said on Tuesday."

Anybody smell a rat? Oh-oh, I just received a call from
a GATA supporter who heard from one of his reliable
sources that in addition to his going to the Bank for
International Settlements meeting Switzerland,
Greenspan solicited the Swiss government to sell its
gold in accelerated fashion, or lend more of it out.

As the GATA camp has been suggesting the past months,
it appears that the Gold Cartel is running out of
bullets to keep the gold price from exploding. That is
what our accumulated evidence suggests. Seems like
Murphy's Law just entered Alan Greenspan's life too. He
was there when the terrorists struck.

How can the Swiss accommodate Greenspan now? If
anything, they are going to need the gold to bail out
the gold loans of THEIR OWN BANKS, which have lent out
at least 2,500 tonnes of bullion.

Will Greenspan and Rubin now have to beg Congress to
sell U.S. gold to bail them out of their nefarious
doings? The hearing on Reg Howe's lawsuit against the
Gold Cabal in U.S. District Court in Boston is only a
few weeks away.

* Gold is at all-time highs in Pakistan. It is closing
in on A$600 in Australia. It served the Asians well
during their financial crisis. It will serve the world
well in the world financial crisis that is bearing down
upon us. Buy gold and the right gold shares. It might
just save the day.